In the Keynesian cross diagram,a decline in autonomous consumer expenditure causes the aggregate demand function to shift down,the equilibrium level of aggregate output to ________,and the IS curve to shift to the ________,everything else held constant.
A)rise;left
B)rise;right
C)fall;left
D)fall;right

Question

Quizplus · Accepted Answer

A decline in autonomous consumer expenditure means that at any given level of output, consumers are willing to spend less. This decreases the aggregate demand function, shifting it downwards. As a result, the equilibrium level of aggregate output falls. This means that the intersection between the IS curve and the aggregate demand function occurs at a lower level of output. Therefore, the IS curve shifts to the left.

In the Keynesian Cross Diagram,a Decline in Autonomous Consumer Expenditure